Obamacare Opens for Business, Shuts Out Labor

When the Obama administration announced July 2 that it would give a breather to employers affected by the Affordable Care Act (ACA), angry unionists noticed a pattern.

Even before this delay, “every corporate interest that’s asked for regulatory relief has gotten it,” said Mark Dudzic, chair of the Labor Campaign for Single Payer, “but the concerns of union plans have been overridden.”

The requirement that employers provide health insurance or pay a fine will be postponed till January 2015 or later.

“Looks like ordinary workers will be forced to pay for health insurance on the original schedule [starting January 2014], while big business is off the hook for at least a year,” said Chris Townsend, political director of the United Electrical Workers (UE).

Justifying the delay, the Obama administration cited employers’ difficulties in reporting employee hours worked, pay, and their insurance offerings—all information needed to calculate whether a fine is due for not offering adequate insurance.

The delay won’t be cheap. It means the government will forego $10 billion in employer payments for 2014, according to the Congressional Budget Office.

Round and Round

Meanwhile, unions have been asking for adjustments that would protect multi-employer health care funds, but getting nowhere.

As a result, even supportive unions such as the Food and Commercial Workers have started to freak out about the law.

UFCW, UNITE HERE, and the Teamsters have gone round and round with the administration about their multi-employer “Taft-Hartley” plans, which provide insurance to 20 million workers, including part-timers, retirees, and workers between jobs, in the construction trades, trucking, hotels, and grocery.

In a strongly worded letter to Democratic congressional leaders, the presidents of the three unions let fly: “Time is running out: Congress wrote this law; we voted for you. We have a problem; you need to fix it,” they wrote. “Our persuasive arguments have been disregarded and met with a stone wall by the White House and the pertinent agencies.

“Even though non-profit plans like ours won’t receive the same subsidies as for-profit plans, they’ll be taxed to pay for those subsidies,” the union leaders wrote. “Taken together, these restrictions will make non-profit plans like ours unsustainable.”

Under Obamacare, small employers could save money by pulling out of their Taft-Hartley plans and sending workers to the new “exchanges” to get a subsidy, said James McGee, director of the Transit Employees Health & Welfare Fund in Washington, D.C. As it stands, “employers will have every incentive to get out of the funds when union contracts expire.” Employers with under 50 workers, which include 93 percent of construction employers, don’t have to pay a penalty for not providing coverage.

Intended Consequences

Part of the reasoning behind Obamacare was to lower overall medical costs by forcing people to pay more for their care—causing them to visit the doctor less often.

“The consumer should continue to expect that their plan is going to be more expensive, and they will have less benefits,” said a consultant quoted in the New York Times.

That part is working. Employers are now seeing the ACA standards as a floor, and trimming back their plans to match the minimum.

The school system in Old Rochester, Massachusetts, went even further. The board demanded that the non-teaching staff such as cafeteria workers, represented by the UE, pay 50 percent of their premiums. Family coverage would have cost 80 percent of their income.

The now-delayed ACA provision says insurance premiums may cost no more than 9.5 percent of a worker’s income. That’s for an individual, though; there’s no limit on the cost of family coverage.

Many workers will face a Catch-22: insurance they can’t afford, but no access to Obamacare’s subsidies because their employer offers health insurance that the law deems affordable.

Because of union pressure, Old Rochester management backed off, but workers will still be left paying 30 percent of their premiums by 2016.

The Wendy’s hamburger chain noted that a majority of its low-paid workers already decline the high-deductible plan the company offers at $2.50 a week—so managers expect that when they start offering a better, Obamacare-approved plan at $25 a week, employees still won’t take it.

Popeye’s and Chipotle have made similar calculations.

In 2014, workers who opt out of such employer-offered insurance, and have no other insurance, will be hit with a fine of $95 annually and increasing in subsequent years.

Many employers will figure it’s cheaper to stop offering insurance, anyway. The annual fine to the employer per worker will be just $2,000—assuming the fines eventually kick in.

Workers so stranded by their employers can buy insurance on the soon-to-be launched insurance “exchanges,” now officially called “Health Insurance Marketplaces.”

There, on a state-run website (or one run by the feds if your state opts out), private plans that meet ACA standards will be listed, with out-of-pocket limits (deductibles and co-pays) of $6,350 for an individual and $12,700 for a family.

These approved plans may impose no caps on annual or lifetime benefits. Pre-existing conditions and gender can’t be considered, but premium prices may vary (within limits) based on smoking, age, the size of your family, and the area you live in.

Anyone can buy insurance from a company on the exchange. For workers whose jobs don’t provide “affordable” insurance, the government will subsidize the cost of buying private insurance for individuals or families making less than 400 percent of the poverty level—$45,960 for an individual and $94,200 for a four-person family in 2013. The subsidies are intended to keep a family’s insurance premiums from growing beyond 9.5 percent of its income.

Excuses, Excuses

Some employers are blaming Obamacare for cuts they wanted to implement anyway.

One favorite area of blame is the so-called Cadillac tax, which doesn’t kick in until 2018. The tax is scheduled to hit plans that have premiums above $10,200 a year for individuals or $27,500 for families—employers would be taxed 40 percent of any amount over those limits.

While employers complained they couldn’t get ready to report on their insurance plans by 2014—and thus got a delay—they’re four-and-a-half years ahead of the game in planning for the Cadillac tax (see box below article).

Their solution is to dump more costs onto workers by offering lower-premium, higher-deductible plans. More than a third of covered U.S. workers are now in plans with deductibles of $1,000 or more, and 14 percent have deductibles above $2,000.

At Cummins, an engine manufacturer based in Indiana, deductibles reach as high as $6,000.

The lower premiums comply with the Obamacare requirement that less than 9.5 percent of your income go to premiums. But the law doesn’t take into account how much you spend on deductibles and co-pays in employer-provided insurance, creating pressure to get less care.

Of course, that incentive inverts what all experts say is the healthier—and cheaper—way to structure medical care. That is to encourage lots of preventive visits, to maintain health and avoid emergencies.

When people neglect routine care because the co-pay is unaffordable—or because the insurance company pays nothing at all till the giant deductible is reached—small problems become big ones, costing more in the end.

To cope with high-deductible plans, AFSCME members in Vermont have negotiated “choice cards,” funded by their employers, which pay their deductibles and co-pays out of an employer fund, said Traven Leyshon, secretary-treasurer of the Vermont AFL-CIO.

Another Obamacare rule that lowers the floor is that employer plans must pay at least 60 percent of the cost of covered benefits, a figure that would make most union negotiators nauseous. But that’s still called “affordable” insurance. This spring, the administration ruled that employers would have to obey the same annual out-of-pocket maximums as the exchanges, $6,350 for an individual and $12,700 for a family.

Falling Forward?

Advocates of Medicare for All say the faults of the ACA can make the case for a system that’s truly “everybody in, nobody out.” The Electrical Workers (IBEW) passed a resolution for “single-payer” at their last convention, and the San Francisco building trades now support single-payer. “I’ve never heard so many building trades folks talk about single payer,” said the UE’s Peter Knowlton.

The paperwork and headaches required to set up Obamacare leave some yearning for a simpler solution, like the set percentage deducted from our paychecks every pay period for Medicare. Increase that, and start Medicare at age zero, say advocates—as the Rube Goldberg system developed by the ACA clunks and lurches forward.

In Vermont, where the legislature passed a bill guaranteeing health care as a human right in 2011, advocates are trying to steer the committees designing the program away from involving private insurance, and toward a purely public system like those used in so many countries.

Under Obamacare, though, they can’t get a waiver to institute any new system until 2017.

The Walmart Loophole

Some states are trying to patch up problems with Obamacare before it hits. California union groups are campaigning to eliminate the “Walmart loophole,” so called because it affects many employees working for the low-wage retail king.

Under the ACA, employers who don’t provide affordable insurance (defined as premiums no higher than 9.5 percent of your income for individual coverage) will be fined $2,000 per full-time worker if their employees have to go to the health insurance exchanges as a result.

It’s the basic pay-or-play idea: All employers with 50 or more full-time workers should put in something, either by covering their workers or by paying a fine. (It’s this fine that has now been delayed.)

But what if the employees, like many Walmart workers, are making so little they’re eligible for Medicaid? No similar fine applies.

Likewise, some employers are cutting hours to evade the “full-time” worker part of the law, which defines full-time as more than 30 hours a week or 130 a month.

The union-supported legislation would penalize big California employers (those with more than 500 employees) if their workers enroll in Medi-Cal, the state’s Medicaid program. The fine is pro-rated by the number of hours worked, so employers can’t evade it by cutting workers’ hours. The fine money would go to Medi-Cal, and there are penalties for employers who discourage workers from enrolling.

What’s Happening To The Taft-Hartley Plans?

The looming changes are already affecting grocery workers. In a contract negotiated this spring, 30,000 Stop & Shop workers in five locals in the Northeast gave up on keeping part-timers with less than 30 hours in the union’s Taft-Hartley plan.

Ratified in March, the contract instead gives a “benefit bonus” to workers who must seek insurance on the exchanges, and a contribution to a pre-tax Health Savings Account.

It also provides that Stop & Shop management can’t cut hours to evade federal health insurance requirements. Under the ACA, employers pay a fine if they don’t offer insurance to full-time workers, defined as 30 hours a week or more. This has led some employers, especially restaurants and retailers, to toy with cutting back employee hours as a way to avoid the fines.

One problem with putting some workers into the exchanges, said Mark Dudzic of the Labor Campaign for Single Payer, is that everyone will be in a different boat, even within the union.

“Instead of having a solidarity-based health care system, where everybody’s in, it’s individualized… it all depends on your situation,” he said. A single mother with three dependents would be fully subsidized on the exchange, whereas working next to her, a married worker with no children might pay a big premium.

“Some will be better off, some will be worse off, some will get lost in the mix,” Dudzic said.

For a detailed explanation of problems for Taft-Hartley plans, see the recent white paper issued by the International Brotherhood of Electrical Workers.

The Private Option

Dozens of state legislatures have refused Obamacare money intended to expand Medicaid, the program that covers many low-wage and unemployed workers. To get states on board, the administration has been wheeling and dealing, with alarming results.

The most extreme case is Arkansas. The administration is apparently allowing Walmart’s home state to entirely privatize Medicaid (final approval is expected in August).

Instead of Medicaid, the state would pay premiums for eligible residents (those earning up to 138 percent of the poverty level) to get private insurance. They would be limited to the “silver,” or third-best, plans on the new insurance exchange.

It’s not clear how people who are broke to begin with will manage the annual out-of-pocket limits allowed on the exchanges, $6,350 for an individual and $12,700 for a family.

Since the “private option” funnels more public money into private insurance coffers, and dismantles Medicaid, the Arkansas plan is likely to attract copycats in other states.